The Magic of the Hodl Movement

Jessie Livermore (JL) was one of the best traders of all time. He started trading in unscrupulous bucket shops as a teenager and shortly became blacklisted nation wide from trading due to his understanding of price action and ability to milk cash from these gambling centers.

What a bucket shop looked like:
Source unknown

To this day he is considered one of the best day traders that ever lived. Why is JL important to the crypto market and how does a day trader relate to the Hodl movement?

It is what he discovers decades later from a veteran stock trader named Mr. Partridge and he describes in chapter 5 of his book Reminiscent of a Stock Operator:

The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others, used to go to old Partridge and tell him what some friend of a friend of an insider had advised them to do in a certain stock. They would tell him what they had not done with the tip so he would tell them what they ought to do. But whether the tip they had was to buy or to sell, the old chap's answer was always the same.

The customer would finish the tale of his perplexity and then ask: "What do you think I ought to do?"

Old Turkey would cock his head to one side, contemplate his fellow customer with a fatherly smile, and finally he would say very impressively, "You know, it's a bull market!"

Time and again I heard him say, "Well, this is a bull market, you know!" as though he were giving to you a priceless talisman wrapped up in a million-dollar accident- insurance policy. And of course I did not get his meaning.

One day a fellow named Elmer Harwood rushed into the office, wrote out an order and gave it to the clerk. Then he rushed over to where Mr. Partridge was listening politely to John Fanning's story of the time he overheard Keene give an order to one of his brokers and all that John made was a measly three points on a hundred shares and of course the stock had to go up twenty-four points in three days right after John sold out. It was at least the fourth time that John had told him that tale of woe, but old Turkey was smiling as sympathetically as if it was the first time he heard it.

Well, Elmer made for the old man and, without a word of apology to John Fanning, told Turkey, "Mr. Partridge, I have just sold my Climax Motors. My people say the market is entitled to a reaction and that I'll be able to buy it back cheaper. So you'd better do likewise. That is, if you've still got yours."

Elmer looked suspiciously at the man to whom he had given the original tip to buy. The amateur, or gratuitous, tipster always thinks he owns the receiver of his tip body and soul, even before he knows how the tip is going to turn out.

"Yes, Mr. Harwood, I still have it. Of course!" said Turkey gratefully. It was nice of Elmer to think of the old chap. "Well, now is the time to take your profit and get in again on the next dip," said Elmer, as if he had just made out the deposit slip for the old man. Failing to perceive enthusiastic gratitude in the beneficiary's face Elmer went on: "I have just sold every share I owned!"

From his voice and manner you would have conservatively estimated it at ten thousand shares. But Mr. Partridge shook his head regretfully and whined, "No! No! I can't do that!" "What?" yelled Elmer.

"I simply can't!" said Mr. Partridge. He was in great trouble.

"Didn't I give you the tip to buy it?"

"You did, Mr. Harwood, and I am very grateful to you. Indeed, I am, sir. But "

"Hold on! Let me talk! And didn't that stock go op seven points in ten days? Didn't it?"

"It did, and I am much obliged to you, my dear boy. But I couldn't think of selling that stock."

"You couldn't?" asked Elmer, beginning to look doubtful himself. It is a habit with most tip givers to be tip takers.

"No, I couldn't."

"Why not?" And Elmer drew nearer.

"Why, this is a bull market!" The old fellow said it as though he had given a long and detailed explanation.

"That's all right," said Elmer, looking angry because of his disappointment. "I know this is a bull market as well as you do. But you'd better slip them that stock of yours and buy it back on the reaction. You might as well reduce the cost to yourself."

"My dear boy," said old Partridge, in great distress "my dear boy, if I sold that stock now I'd lose my position; and then where would I be?"

Elmer Harwood threw up his hands, shook his head and walked over to me to get sympathy: "Can you beat it?" he asked me in a stage whisper. "I ask you"

I didn't say anything. So he went on: "I give him a tip on Climax Motors. He buys five hundred shares. He's got seven points' profit and I advise him to get out and buy 'em back on the reaction that's overdue even now. And what does he say when I tell him? He says that if he sells he'll lose his job. What do you know about that?"

"I beg your pardon, Mr. Harwood; I didn't say I'd lose my job," cut in old Turkey. "I said I'd lose my position. And when you are as old as I am and you've been through as many booms and panics as I have, you'll know that to lose your position is something nobody can afford; not even John D. Rockefeller. I hope the stock reacts and that you will be able to repurchase your line at a substantial concession, sir. But I myself can only trade in accordance with the experience of many years. I paid a high price for it and I don't feel like throwing away a second tuition fee. But I am as much obliged to you as if I had the money in the bank. It's a bull market, you know." And he strutted away, leaving Elmer dazed.

What old Mr. Partridge said did not mean much to me until I began to think about my own numerous failures to make as much money as I ought to when I was so right on the general market. The more I studied the more I realized how wise that old chap was. He had evidently suffered from the same defect in his young days and knew his own human weaknesses. He would not lay himself open to a temptation that experience had taught him was hard to resist and had always proved expensive to him, as it was to me.

I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend.

And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.

The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.

Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this you must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps! Wait until you see or if you prefer, until you think you see the turn of the market; the beginning of a reversal of general conditions. You have to use your brains and your vision to do this; otherwise my advice would be as idiotic as to tell you to buy cheap and sell dear. One of the most helpful things that anybody can learn is to give up trying to catch the last eighth or the first. These two are the most expensive eighths in the world. They have cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.

Another thing I noticed in studying my plays in Fullerton's office after I began to trade less unintelligently was that my initial operations seldom showed me a loss. That naturally made me decide to start big. It gave me confidence in my own judgment before I allowed it to be vitiated by the advice of others or even by my own impatience at times. Without faith in his own judgment no man can go very far in this game. That is about all I have learned to study general conditions, to take a position and stick to it. I can wait without a twinge of impatience. I can see a setback without being shaken, knowing that it is only temporary. I have been short one hundred thousand shares and I have seen a big rally coming. I have figured and figured correctly that such a rally as I felt was inevitable, and even wholesome, would make a difference of one million dollars in my paper profits. And I nevertheless have stood pat and seen half my paper profit wiped out, without once considering the advisability of covering my shorts to put them out again on the rally. I knew that if I did I might lose my position and with it the certainty of a big killing. It is the big swing that makes the big money for you.

So what are the general market condition? From my experience it’s all about monetary conditions. Is it tight or loose? And it is pretty easy to see what kind of condition it is if you pay attention. So as long as the general market conditions are loose all you really have to do is exercise trade management. Meaning exercise patience in a long consolidation or exercise restraint from taking profits in a large price run up.

It’s all a patience game in this kind of trading. Every time you push a button to make a trade the same kind of dopamine is released in your brain as if you were gambling. This is why it is so difficult to do nothing as a trader. We as humans get addicted to this rush. Finding other avenues for contentment is recommended.

I like to think of King Solomon and what he wrote in Ecclesiastes when I get impatient. He was the richest and most powerful person in the world and what did he say about it? It’s not the answer, it’s all “grasping for the wind”. So might as well be content with what you have now, because nothing will make you later on. Even though our minds tell us otherwise.

Most holders will prob hodl through a tight monetary environment since hodling at this point seems to be more of a protest about values, ethics, efficiencies and opportunity for the under banked in a decentralized money system. But as a trader this article will focus more on market psychology and trade management as it relates to hodling.

Most analyst that believe in crypto as an asset class predict a mature market at 10-100x greater than the current total market cap. That is an amazing risk/reward opportunity if these analyst are correct. The thing is bull markets tend to get ahead of valuations. So we might see these prices sooner than the actual maturity of the tech. If we do see a mature market cap size and we see a tight monetary condition, as a trader I might reconsider the hodl movement.

But then again this asset class has never been through a tight monetary environment since it was created in the previous one. So we really don’t know what will happen and this time “really could be different”. My guess is it will enter a true bear market like most asset classes.

That being said, if money gets tight tomorrow I would hodl through it since a mature market might mean a double digit trillion figure. And that is enough appreciation potential to go through any extended bear market.

I am just going to hold and see what happens. If nothing happens then you keep looking for another attractive asset until eventually something turns out to be big. Warren Buffett says all you need is a couple investments in your life to make you rich. The right crypto play could be one of them if you have the disciple to hodl.